Nauru’s economy is based on phosphate mining, and phosphate revenues have given the country a relatively high per capita income (though little economic data is published). Phosphate reserves are not, however, expected to last beyond the late 2010s, and the government has been exploring other sources of income (for example, fishing, tourism and offshore financial services). There is very limited potential for agriculture and the country is dependent on imports for basic necessities such as food, consumer and capital goods. Very few Nauruans work, or are permanently resident, abroad.
Surpluses from the phosphate industry have been invested abroad by the Nauru Phosphate Royalties Trust to provide income as the phosphate runs out. The management of these funds has for years been one of the major issues on the island.
The Nauru Agency Corporation was established to encourage foreign investment in international financial services; it assists with the registration of holding and trading companies and in obtaining banking, trust and insurance licences.
In January 1999 Nauru signed its first loan agreement with the Asian Development Bank, under which the government was to diversify the economy to prepare for the exhaustion of phosphate reserves and to embark on a programme of economic reforms, including a sharp reduction in public sector expenditure and rises in taxes and duties.
From 2001, when its centre for processing asylum seekers was established, Australia made substantial contributions to government revenues and there was, for several years, a boost for the catering sector. By 2007 revenues generated by the processing centre amounted to around a fifth of the country’s GDP. Following its decision to close the centre during 2008, the incoming Labor administration in Australia committed itself to maintaining its aid programme, which was worth about US$31.8 million in 2012/13. In September 2012 Australia re-opened the processing centre which was to accommodate up to 1,500 asylum seekers, and by 2013 was employing some 600 Nauruans; it was, after the government, the largest employer in the country.
GDP fell by about a third over 2005–07 owing to a fall in public expenditure and suspension in phosphate mining following storm damage to the island’s port facilities. The resumption of phosphate mining in mid-2006 led to a substantial hike in GDP in 2008, when it almost doubled. A fall in GDP of 20 per cent in 2009 was then followed by double-digit growth in 2010–14.